Two former Tennessee customers of
nationwide mortgage lender Household International are charging in a Nashville
federal court that the corporation was functioning as a racketeering operation
when it offered misleading loan terms to its potential clients.

The allegations are, in part, a
reprise of the charges underlying a $484 million settlement reached in 2002
between Household and 50 state attorneys general who were investigating
predatory lending in the "sub prime" lending market, which specializes in
high-cost loans for those with low credit ratings.

Nashville attorney G. Kline
Preston IV argues that Household is liable under the civil part of the Racketeer
Influenced and Corrupt Organization statutes. These federal criminal laws were
designed to aid prosecutors in the battle against organized crime and criminal
gangs, but they have a civil provision that makes possible awarding triple
damages if a lawsuit is successful.

Household was acquired by HSBC
Holdings PLC in March 2003. Company spokesman James Piepers declined to comment
on the federal suit Friday because the corporation had not been served with it.

Plaintiffs Billy Suddarth Jr. and
Angela Suddarth, who did not participate in the settlement, argue that they were
victimized by Household's lending practices after they purchased a business that
had previously obtained financing from Household.

The lawsuit says that more than
13,000 Tennesseans were defrauded by the company.

Among the complaint's charges:

o Household misrepresented
interest rates by trying to disguise a high-rate mortgage as a low-rate loan.
The plaintiffs also allege that the company misled consumers into thinking that
they were reducing their principal amounts because of lower interest rates, when
in fact it was because of a requirement that they make extra payments.

o Household lent money on terms
that would eventually require large balloon payments, without disclosing the
existence or amount of those balloon payments.

o The company applied payments to
customers' accounts in such a way that even if a scheduled payment was not late,
it would create a shortfall in interest, which resulted in excess finance
charges.

The lawsuit claims the company's
actions "establish a pattern of racketeering activity" that defrauded the
plaintiffs between Jan. 1, 1999, and Sept. 30, 2002.

The lawsuit incorporates the
pleadings of the state's action against Household that resulted in last year's
settlement agreement in Davidson County Chancery Court.

The settlement followed a
multistate investigation into allegations that Household was misrepresenting
essential information such as loan costs, repayment requirements and insurance
terms.

Tennesseans were entitled to $6.5
million under the terms of the settlement, according to the state Department of
Financial Institutions.

The federal suit seeks
unspecified damages.

The civil provisions of RICO
enable plaintiffs' attorneys to charge that their clients have suffered economic
harm because of a pattern of fraud and misconduct.

Plaintiffs in a civil action must
prove their case based on a "preponderance of the evidence," a less stringent
standard than "beyond reasonable doubt," which applies in criminal prosecutions.

The case has been assigned to
U.S. District Court Judge Robert Echols.